Banco de Brasilia Shares Slide After Deal for Banco Master Nixed

(Bloomberg) – Banco de Brasilia Sa Stock stock has fallen the most since April after April, after the refusal of the Brazil’s central bank to buy a problematic lent Banco Master SA, and left the target of the proposed purchase with little option while looking for fresh capital.

BRB, Banco de Brasilia, as it is known, will review the decision, but still believe in the principle of the process, he said. Banco Master, who is not open to the public, said he would look at it by adding, “Trusts the Bank’s strategy and operations,” he said.

Rejection reduced BRB shares up to 17% in Sao Paulo, to 9.01 Reais, the largest intraday decline since April 7.

According to a person familiar with discussions, BRB is looking for meetings with the Central Bank and analyzes how the organizer can handle his concerns. BRB and Banco did not say why the master was rejected. The Central Bank did not respond to the request for comments.

Since BRB belongs to the capital of Brazil, critics argued that inheritance would mean recovery of a government with little business logic.

The transaction, which was announced in late March, was already scaled to gain the approval of Central Bank. BRB reduced the value of assets to be taken from 40 billion Reais to 25 billion Reais ($ 4,58 billion) and left 51.2 billion Reais, except for the agreement.

The BRB also guaranteed that Master’s control shareholders would not be part of the new bank’s management.

Until recently, the master had a high brochure, an average of lending portfolio expanded by 86% annually, rented an office leaping in Miami and acquired competitors. However, in order to grow so quickly, the Master was greatly reassuring an incentive presented by the deposit insurance fund known as FGC.

A December 2023 rule change affecting this strategy doubted the financing of the bank and expressed his concern that the situation could pose a wider risk for the sector.

Since the announcement, some investors have tried to escape from Master using about 4 billion Reais liquidity loan lines from FGC.

In June, Banco BTG Pactual SA bought about 1.5 billion Reais assets from Daniel Vorcaro, the main shareholder of Master, who agreed to inject all revenues into the bank.

When the agreement with Banco de Brasilia stopped in the regulatory review, Master’s financing options began to look for options. In late August, Bloomberg News reported that 12 billion Reais from FGC was looking for a new credit line to continue its activities while trying to sell assets.

Recently, Vorcaro has traveled abroad to meet with potential investors as the Central Bank’s resistance to the agreement became clear, according to a person familiar with the issue.

-Leda help from Alvim.

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